EUR 4.56 For Business Accounts Only

JKSB Quarterly Highlights_Seylan Bank PLC (SEYB)_3QCY16

Note:

Healthy growth in total operating income (driven by both NII & non-interest income)

SEYB's net interest income experienced a healthy increase of 12.9% YoY as the positive impact from the strong loan book growth of 29.1% YoY was partially offset by the YoY contraction of NIMs from 4.54% to 4.00%. On the other hand, SEYB's non-interest income increased sharply by 46.3% YoY mainly with the help of the steep rise in net trading income (+Rs.402 Mn) which was driven by the mark-to-market profits stemming from favourable rate movements during the quarter. Consequently, the proportion of non-interest income in total operating income (before impairment) increased from 22.6% to 27.5%.

Higher impairment charges and operating expenses affected bottom line growth

SEYB's total impairment charges for the quarter were higher by Rs.324 Mn comparing to 3Q CY15 which included a reversal of Rs.222 Mn in collective impairment charges. Although SEYB's total operating income increased by 20.4% YoY, the increase in impairment charges restricted the growth in net operating income to 12.0% YoY. In addition to this, SEYB's bottom line growth was affected by the 15.1% YoY increase in operating expenses. Consequently, SEYB recorded an 8.1% YoY increase in earnings to equity during the quarter. For the cumulative period 9M CY16, SEYB's earnings have increased marginally by 3.7% YoY.

We project SEYB's full-year earnings to reach Rs.4 bn in CY16E

We project SEYB's full year earnings for CY16E to reach Rs.4.0 bn, which would translate to PE Ratios of 7.7x and 5.3x for the voting and non-voting shares at the current trading price of Rs.90.00 and Rs.61.50 respectively. Furthermore, the DPS declared of Rs.2.75 declared by SEYB in CY16 translates to dividend yields of 3.1% and 4.5% for the voting and non-voting shares respectively.